Moody’s affirms BDO and BPI’s ratings, outlooks

MOODY’S RATINGS has affirmed its long- and short-term ratings and outlooks for BDO Unibank, Inc. and Bank of the Philippine Islands (BPI), citing their profitability and strong deposit bases.

The debt watcher affirmed the two banks’ “Baa2/P-2” long- and short-term foreign and local currency deposit ratings and “stable” outlooks, it said in separate statements late on Wednesday.

Also affirmed were their counterparty risk ratings and assessments, baseline credit assessments, and the ratings for their respective medium-term note programs.

For BDO, Moody’s said the affirmed ratings reflect its strong asset quality, funding and liquidity, adding that it has ample buffers and good profitability.

“The bank’s funding and liquidity will remain its key strengths, with a robust and dominant deposit franchise supporting its very high deposit market share, and hence access to lower cost of funding and high current and savings account deposit ratio of 68% as of end-2025. Its less-stable funds ratio stood at an adequate 23.1% as of end-2025, while its core banking liquidity ratio was 20.6% as of the same date,” it said.

It added that BDO’s nonperforming loan (NPL) ratio is likely to stay stable this year, still supported by write-offs on its fast-growing unsecured retail loans.

Meanwhile, its credit costs may stay elevated amid the surge in the share of consumer loans in its portfolio over the past two years, and amid preemptive provisioning as macroeconomic conditions become more challenging.

“The bank’s high concentration to large corporate loans and long-dated investment securities will also pose risks to its asset quality.”

The credit rater sees BDO’s return on assets (RoA) to range from 1.4% to 1.5% this year as net interest margin (NIM) stabilizes, even while credit costs and operating expenses remain elevated.

Meanwhile, capitalization will stay adequate, although capital generation may grow slower as credit demand eases. Widening government bond yields could also hit its Tier 1 ratio.

Moody’s said BDO’s deposit ratings will depend largely on the movement of the Philippines’ sovereign rating as they are at the same level.

Meanwhile, a significant deterioration in its asset quality, which could drive up credit costs and hit its earnings, as well as increased risks from related party lending or loan concentration, could lead to a downgrade.

BPI
For BPI, Moody’s said it credit strengths are strong profitability, adequate capital, healthy liquidity, and stable funding supported by its solid deposit franchise.

These balance out its weakening loan quality as it continues to expand its higher-risk retail lending businesses and amid “challenges” in its corporate segment after it reported in the first quarter that “several corporate loans slipped into problem loans due to challenges unrelated to the conflict in the Middle East.”

It said the bank’s problem loan ratio and credit costs have increased amid the seasoning of its retail loans and heightened macroeconomic risks.

“We expect the retail segments to experience further strain in 2026, given the shrinking financial buffers of retail borrowers amid higher inflation in the Philippines,” Moody’s said.

“Although the bank has tightened credit underwriting and plans to moderate its retail loan growth, we expect the bank’s asset risks to remain elevated, with credit costs normalizing closer to the 0.9% range in 2026. The bank’s high concentration to large corporate loans and long-dated investment securities will also pose risks to its asset quality.”

Meanwhile, the bank’s NIM will likely continue expanding in line with growth in its retail loan, while its RoA could decline slightly due to elevated credit costs.

“Additionally, lower repayment capacities of retail borrowers amid higher inflation will add further upside on the bank’s credit costs.”

The debt watcher said BPI’s funding and liquidity will remain strong thanks to its strong deposit base.

“Although the bank’s current and savings account deposit ratio has declined to 60% as of March 2026, from 63% the year before, the bank’s cost of funds remains one of the lowest among its domestic rated peers. As of end-2025, the bank’s less-stable funds ratio stood at a good level of 17.1% and its core banking liquid assets ratio was 21.7%.”

Like BDO, BPI’s ratings will hinge on the movement of the Philippines’ sovereign rating as they are at the same level.

Downgrades could be possible if its solvency metrics, including its asset quality and liquidity ratios, worsen significantly. — Aaron Michael C. Sy